Tech talk

Here are 3 pieces of Houston startup advice from Capital Factory's emerging tech panel

As a part of its Texas Startup Manifesto, Austin-based Capital Factory came into town to talk about the Houston's ecosystem and advice for tech startups looking to do business in town. Natalie Harms/InnovationMap

Throughout the year, Austin-based Capital Factory loads up a bus and takes startup founders and tech entrepreneurs around the Lone Star State in order to better connect the dots of innovation within Texas' major metros. The Texas Startup Manifesto bus recently put it in park outside Station Houston and hosted a tech-focused panel at Accenture's innovation hub.

The panel, which was hosted by two deep tech startup founders, asked some important questions about Houston's ecosystem and startup needs to three experts. Trevor Best of Syzygy Plasmontics and Diana Liu of Arix Technologies represented the startups, while Allison Sawyer of League of Worthwhile Ventures, Mark Volchec of Las Olas VC, and Brian Richards of Accenture fielded their questions.

The panel started out with the state of Houston's innovation ecosystem — which, of course, was the whole point of the one-day field trip to the Bayou City. The panelists seemed to agree that Houston has things it needs to improve on, but the point is not to try to copy any other market.

"We can't try to be Silicon Valley. We're just simply not," Richards says. "What we have to focus on is what our strengths are."

For instance, Houston has a lot of money within the city, but that hasn't yet translated to a large amount of investments in startups. Even if the city found $1 billion to start investing in companies, Richards says that wouldn't solve everything instantly. Houston has to be able work on the ecosystem as a whole, not just one thing in particular.

"We have so many problems to solve, and we have to solve them in parallel," Richards says. "We have to fix them all at once."

The city's ecosystem aside, the panel weighed in on some of their own advice for tech startups making waves in Houston.

Hire a business-minded leader, like, yesterday.

One of the most crucial aspect for any startup is the team behind the product, and having a diversity of expertise on that team is especially in tech startups, which are usually instigated by a tech-focused founder.

"I think it's really important to have a balanced founding team," Volchec says. "If everyone is tech, I think it's really difficult."

As a venture capitalist and former founder himself, Volchec's biggest critique is that, startups and founders don't start sales early enough. Volchec says he once signed a deal with a company before they even had a product let alone revenue. The key distinguisher for him was that the company already had contracts in place from customers.

Having that person to sell the company is so important, and you need a business-focused person at the helm to do so. For most companies, that's not the tech-minded founder.

"If you're the scientist, why do you even want to be the CEO?" Volchec asks. "The CEO's job is to be out there and selling — to investors, to clients, to employees."

According to the panelists, sooner is better for making that hire.

"if you don't hire a CEO, and you raise enough money, someone will hire a CEO for you, and you might not like that CEO," Volchec says.

Have a free discovery.

In particular, B-to-B companies should have a free trial, so to speak, for their product. It's Sawyer's pet peeve, she says, when startups charge for the discover process. It's strategic to give access to some people within the company your startup is trying to sell to, that way they get hooked and want to get more access for their whole team.

It does make the process a little more challenging, Sawyer says, since it requires a little more upfront funds.

"You do have to raise a little bit more money, but you do get to scale a lot faster," she says.

Corporate venture groups can be more than just investment. 

When looking to scale your product into bigger corporations, a way in is through corporate venturing groups, according to the panelists, even if money isn't the right fit. You're more likely to get a meeting with a venture arm than with the company itself.

"I never took corporate venture money, because they were a little too slow and it was a lot of extra accounting work, Sawyer says. "But I loved working with corporate venture when it comes to pilots. I think they are an underused resource for startups."

It also helps that more and more companies are devoting resources to these groups.

"I'm seeing corporate venture groups all over the place," Sawyer says. "Even if you're not taking their money, they will get you in the door for a pilot."

Overall, big companies are more keen to work with startups of late, says Richards, who hosts C-level execs from big companies on a daily basis in Accenture's Innovation Hub.

"I've never seen [corporations] more motivated than they are right now to be able to think differently on how they are able to engage Houston," he says.

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Building Houston

 
 

A new report finds Houston a top city for business friendliness and connectivity. Photo via Getty Images

Houston, the future looks bright.

A new study from the fDi Intelligence division of the Financial Times places Houston at No. 7 among the top major cities of the future for 2021-22 across North, South, and Central America. Among major cities in the Americas, Houston appears at No. 3 for business friendliness and No. 4 for connectivity.

"Houston is known as one of the youngest, fastest-growing, and most diverse cities anywhere in the world. I am thrilled that we continue to be recognized for our thriving innovation ecosystem," Houston Mayor Sylvester Turner is quoted as saying in the fDi study.

Toronto leads the 2021-22 list of the top major cities in the Americas, followed by San Francisco, Montreal, Chicago, and Boston.

The rankings are based on data in five categories:

  • Economic potential
  • Business friendliness
  • Human capital and lifestyle
  • Cost effectiveness
  • Connectivity

Houston's no stranger to the list. Last year, the city ranked No. 3 on the same study, and in 2019, claimed the No. 5 spot.

"The fact that Houston consistently ranks among the top markets for foreign direct investment speaks to our region's connectivity and business-friendly environment," says Susan Davenport, chief economic development officer at the Greater Houston Partnership. "Many of the industry sectors we target for expansion and relocation in Houston are global in nature — from energy 2.0 and life sciences to aerospace and digital tech. The infrastructure and diverse workforce that make these prime growth sectors for us among domestic players are equally attractive to international companies looking to establish or strengthen ties in the Americas."

International trade is a cornerstone of the Houston area's economy. In 2020, the region recorded $129.5 billion in exports, according to the Greater Houston Partnership. China ranked as the region's top trading partner last year, followed by Mexico, Brazil, Korea, Germany, the Netherlands, India, Japan, the United Kingdom, and Italy.

Houston's role as a hub for foreign trade and international business "is likely to support the region's economic recovery in the months and years ahead," the partnership noted in May.

"We talk often of Houston as a great global city — one that competes with the likes of London, Tokyo, São Paulo, and Beijing. But that's only possible because of our infrastructure — namely our port — and our connections around the world," Bob Harvey, president and CEO of the partnership, said last month. "Houston's ties abroad remain strong."

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